University of the Philippines Manila College of Arts and Sciences Padre Faura, Manila

Socio-economic Impacts of PPP on Transportation Infrastructure Development: The case of PUJ Drivers and Commuters in South Luzon Expressway

An Undergraduate Thesis Presented to the Deparment of Social Sciences College of Arts and Sciences University of the Philippines Manila

In Partial Fulfillment of the Requirements For the Degree of Bachelor of Arts Major in Development Studies

Dr. Edberto M. Villegas Thesis Adviser

Presented by

Arlene I. Magtalas 2008-18679

March 2012

APPROVAL SHEET

In partial fulfillment of the course requirements for the degree of Bachelor of Arts Major in

Development Studies, this undergraduate thesis, entitled, “ Socio-economic Impacts of PPP on Transportation Infrastructure Development: The case of PUJ Drivers and

Commuters in South Luzon Expressway ”, prepared and submitted by Arlene I. Magtalas, is hereby recommended for approval

______Dr. Edberto M. Villegas Thesis Adviser Department of Social Sciences

______Date signed

This thesis is hereby accepted and approved as partial fulfillment of the requirements for the degree of Bachelor of Arts in Development Studies.

______Prof. Carl Marc Ramota Chairperson Department of Social Sciences

______Date signed

ACKNOWLEDGEMENT

This thesis would not have been possible without the help of several individuals, institutions and organizations who contributed and extended their valuable assistance in the preparation and completion of this study. I would like to express my sincerest gratitude to ...

First and foremost, I offer my utmost gratitude to my parents, Larry Magtalas and Nenita

Magtalas who never failed to provide financial and moral support. As well as to my siblings,

Aldrine, Jaja and Lyrra; niece, Ritz; and nephew, Gian, who never failed to inspire me.

They are the ones that keep me going.

To my Thesis Adviser, Doc Edberto Villegas, for the supervision, advice and guidance you have extended to me while doing this thesis and even before. It is an honor to be mentored by you. Thank you very much for the friendship.

To Mr. Jose Enrique ‘Sonny’ Africa, Executive Director of IBON Foundation and the staff of

IBON Foundation, for accommodating me in your office and providing necessary materials relevant to this study.

To Mr. Steve Ranjo, Secretary-General of Pagkakaisa ng mga Samahan ng Tsuper at

Operators Nationwide (PISTON), who accommodated me in their headquarters and provided me the necessary background information for this study.

To Atty. Edmundo Reyes, Executive Director of the Toll Regulatory Board, Mr. Julius

Corpuz, TRB Spokesperson and Mr. John Patrick Ojano, for welcoming me in your office and for sharing your time and knowledge.

To Dr. Gilbert Llanto, Senior Research Fellow at the Philippines Institute for Development

Studies (PIDS), for your valuable knowledge.

To HM Transport, for allowing me to conduct my survey on bus passengers in your terminal in Cubao.

To all my respondents, especially the jeepney drivers in Alabang, for answering my survey, providing necessary information and sharing your thoughts. Thank you for making this thesis possible.

To my professors, Sir Ponsaran, Sir Simbulan, Sir Mesina and Ma’am Legaspi, for the lessons about political economy and life, for teaching me to always look beyond the surface and for making my UP experience socially-relevant. I am proud to be your student.

To Block 5, for accepting me in the block.

To my thesis-mates, for the stories we have talked about while waiting for our turn during our consultation with Doc Ed in DSS.

To my dorm-friends, Lyrra, Mars, Cha, Trixia, Tin, Joy, Ayen, Anchin, Mia, Jen, Badet and the entire third floor, for the support and for putting up with me during that fateful week before the deadline.

To my super friends, Ariza, Rayla, Hann, Reggie, Pipoy and to JV, for always being there, for the memories, for keeping me sane and for pressuring me to do my thesis. Special thanks to Ariza and Rayla for accompanying me during some of the interviews and to JV, for accompanying me during data gathering.

iii

And lastly, to our All Mighty God, for the guidance, support and blessings You have given us every single day of our lives.

ABSTRACT

This study was conducted to assess the socio-economic impacts of public-private partnership on transportation infrastructure development on commuters and PUJ drivers in

South Luzon Expressway. This research aimed to know whether PPP has truly promoted the interest of the public and to evaluate the PPP strategy of the government in providing transportation infrastructure using the perspective of the people to whom it is intended for.

To gather the needed data, survey questionnaire was used. The survey included 60 commuters and 30 jeepney drivers. The researcher initially studied and analyzed the socio- economic characteristics of the respondents before the implementation of the toll hike and then compared it to their current situation. The results showed that PPP in SLEx only worsen the socio-economic situation of those who regularly pass the said tollway, especially the jeepney drivers. The burden of the toll falls on the jeepney drivers because an increase in toll does not necessarily translate to an increase in fare. The commuters, on the other hand, are not directly affected. The results also showed that though SLEx physically improved, the respondents believe that these improvements are not worth the increase in toll. The data gathered proved that PPP failed miserably to deliver its promises of improved services, increased efficiency and lower costs. The researcher believes that the vicous cycle of corporate takeover of the government, debt and onerous user fees, created by PPP, must be stopped from further oppressing the people.

TABLE OF CONTENTS CHAPTER TITLE PAGE Title Page Approval Sheet i Acknowledgement ii Abstract v Table of Contents vi Chapter I: Thesis Proposal Statement of the Problem 2 Definition of Terms 4 Theoretical Framework 5 Methodology 6 Hypotheses 8 Review of Related Literature 8 Scope and Limitation 17 Significance of the Study 17 Chapter II: Background of the Study Public-Private Partnership 20 Schemes for Private Sector Participation in Infrastructure Development 26 The South Luzon Expressway (SLEx) 29 The Toll Regulatory Board 38 Chapter III: Presentation and Analysis of Data Profile of Respondents 43 Socio-economic Indicators 48 Respondents’ Insight on the Toll Hike And Slex 54 Respondents’ Insight on PPP and Government Responsibility 57 Chapter IV: Conclussion and Recommendations Conclusion 61 Recommendations 67 Bibliography 69 Appendices 72

CHAPTER I

THESIS PROPOSAL

Statement of the Problem

Transportation is a public good. It is of utmost importance that people have access to it. It is a part of every person’s daily life. Transportation has sociological, political and economic relevance active political and social participation requires physical mobility; and the transfer of goods and services, would be hard without reliable transportation infrastructure. Transportation cost affects the price of goods and services. Furthermore, difficulty in transporting goods and services discourages economic activities and thus, hinders growth. In the case of the Philippines, an increase in transportation cost is almost unbearable for the regular workers and the minimum wage earners since their wage remains stagnant. Hence, having transportation infrastructure that is accessible, reliable and affordable is very important.

It is the responsibilty of the government to provide roads and mass rail transits to its people. But, according to President Benigno Aquino III, the government lacks funds to develop public infrastructure. Hence, to answer this problem, his administration would resort to public-private partnerships. According to him, PPP will help solve the country’s severe lack of infrastructure in the midst of the tight fiscal situation that the government is facing.

Public-private partnership, in E.S. Savas’ “ Privatization and Public-Private

Partnership ”(1999), is defined as a form of privatization included in the ‘delegation strategy’. This means that ‘the government retains responsibility and oversight but uses the private sector for service delivery, for example, by contracting for services, or outsourcing’.

Six tollway systems in the Philippines, the North Luzon Expressway (NLEx), South

Luzon Expressway (SLEx), the Subic-Clark-Tarlac Expressway (SCTEx), Manila-Cavite

Expressway (Coastal Road), South Metro Manila Skyway (Skyway), and the Southern

Tagalog Arterial Way (Star Tollway), are under PPP arrangements. In the early part of

2011, NLEx raised its rates while SLEx imposed a 300% toll fee hike. Rail transits are also built under PPP. Now, commuters are facing the possibility of an increase in rail transit fees.

Public-private partnership provided us with improved roads and other transportation infrastructure. But did it solve the problems of the transportation sector? Did it improve the lives of Filipinos? Did it contribute to development? To answer the aforementioned questions, the researcher chose this topic.

The researcher aims to identify the socio-economic implications of PPP in transportation infrastructure development. The research seeks to know whether PPP has truly promoted the interest of the public. It aims to evaluate the PPP strategy of the government in providing transportation infrastructure using the perspective of the people to whom it is intended for. Also, it intends to answer the question, ‘who benefits from PPP?’

And lastly, the study will also identify lessons or recommendations that will help determine whether PPP sould be pursued or not.

Definition of Terms

Infrastructure - As used in the research, it refers to facilities, services and structures

needed for the operation of the society.

Privatization - According to Savas’ Privatization and public-private partnership,

“privatization is the act of reducing the role of the government or increasing the role

of the private institutions of society in satisfying people’s needs; it means relying

more on the private sector and less on government”.

Public-Private Partnership - PPP is a form of privatization. The research also used

the ADB’s definition of PPP which is “a range of possible relationships among public

entities such as ministries, departments, municipalities or state-owned enterprises and

private local or foreign businesses or investors in the context of infrastructure and

other services”.

Toll Fee - amount charged to the public, specifically the drivers, for their use of

tollways

Tollway - As used in the research, it refers to roads which may be privately or

publicly built for which the driver is required to pay a fee.

Transportation Infrastructure - refers to roads, rail transits, tollways, airports and sea

ports. But, in the research, transportation infrastructure is used to refer to tollways.

Theoretical Framework

No concept, thought or idea can be singled out away from the others. Everything is interrelated, just like the public-private partnership economic strategy of the Aquino administration. PPP is part of a much broader concept which is globalization. Globalization, in turn, is a mechanism used by imperialist countries to maintain hegemony. That is why, to achieve the objectives of this paper, it is important to employ the historical materialism approach.

To identify the socio-economic implications of PPP on transportation infrastructure development, it is important to know not just the what, who and where of PPP but also its origin. PPP did not emerge out of nowhere. PPP emerged to uphold the interests of some people somewhere. That is the job of historical materialism, to analyze the material conditions and the dialectics that led to the ‘development’ of the society or in this paper, the emergence of PPP. But, historical materialism does not stop with the identification of the origin and the process that led to the emergence of PPP. It is also a very useful tool to analyze the effectivity of PPP. To be able to do that, the researcher must come back to the years when PPP is not yet implemented and during the first years of PPP and then compare it with the present condition. Historical materialism is also helpful if the researcher wants to identify the existing contradictions within the implementation of PPP such as the conflict between private profit and public interest. And, equally important, historical materialism comes in handy when the goal of the researcher is to relate the local situation to a global phenomenon. In this paper, it is the relationship between PPP on transportation infrastructure development and globalization.

Independent Variables Policies implemented by International Financial Institutions: Liberalization Deregulation Dependent Variables Privatization Impacts of PPP on Transportation o PPP Infrastructure(Macro-level) Displacement Increase in Rail Transit fares Toll Hikes PPP on Transportation Impacts of PPP on Transportation Infrastructure Infrastructure(Micro-level)

Rail Transits Socio-economic implications

Roads of PPP and toll hikes to

Tollways drivers of PUVs and o NLEx commuters using SLEx o SCTEx o SLEx o Star Tollway o Coastal Road o Skyway

Methods of Study

The study on the socio-economic impacts of PPP on transportation infrastructure development among drivers of public utility vehicles and commuters who regularly use SLEx is generally a qualitative reasearch. But to be able to support the qualitative findings with data, the research also used quantitative research. It used qualitative methods by conducting survey and participant-observation which provided descriptive answers and quantitative methods because it used questionnaires and used basic statistical test to know the significant differences between variables. Archival research was also done to gather information and related literature, including secondary data, to support the primary data gathered and to

6 increase the credibility of the research. The researcher coordinated with government offices and other government agencies that handle transportation infrastructure development such as the Department of Transportation and Communication (DOTC) and the Toll Regulatory

Board (TRB) to ask for additional resources and to conduct interviews.

The sample came from the 300, 000 motorists that travel along SLEx every day.

South Luzon Expressway was chosen because it is used by the largest number of motorists per day compared to NLEx and SCTEx, because among the six tollway systems in the

Philippines built under PPP arrangements, SLEx is the biggest and because in 2011, toll fee in SLEx increased by 300%. The sampling method used is quota sampling because it will be impractical to do a random survey when dealing with commuters and drivers. Quota sampling and not simple accidental sampling was used because the sample was divided into three categories, drivers of public utility jeepneys, commuters who take the bus, and commuters who take the jeep. The minimum number of commuters and/or drivers of PUVs included in the survey is 90, of which, 60 are commuters while 30 are drivers.

The questionnaire is divided into three parts. The first part deals with the basic information about the respondent including the civil status and educational attainment. The second part, on the other hand, determines the socio-economic status of the respondent before and after the imposition of the toll hike. While the third part focuses on the opinions and views of the respondents regarding the PPP on transportation infrastructure development and toll hikes. All these information are used to evaluate the socio-economic impacts of PPP on transportation infrastructure development among drivers of public utility vehicles and commuters who regularly pass through SLEx.

The researcher studied and analyzed the socio-economic situation of the respondents before and after the pursuance of PPP and the imposition of toll hikes to see if there were significant changes in their welfare in terms of income and access to social services. And then the researcher analyzed the opinion of the respondents regarding the PPP on transportation infrastructure development and toll hikes.

Hypotheses

The public-private partnership strategy of the government does not answer the problems of the transportation sector. PPP-built expressways do not contribute to the improvement of the socio-economic status of the drivers of public utility vehicles and commuters. Public-private partnership leads to high toll rates because it is the interest of the private corporations to earn profit that is prioritized and not the interest of the public. The improvement in services offered by SLEx was not worth the increase in toll.

Review of Related Literature

Ibon Foundation. PPP: Private Gains, Public Costs . Ibon Facts and Figures Special

Release, 15 and 30 September 2010. 19 pages

The paper discussed how public-private partnership on infrastructure development assures neither fiscal benefits nor economic and social gains. According to this paper, the

Asian Development Bank defines PPP as a range of possible relationships among public entities such as ministries, departments, municipalities or state-owned enterprises and private local or foreign businesses or investors in the context of infrastructure and other services.

The paper also stated the roles played by the private sector and the government under a public-private partnership arrangement. Contributions of the government in a PPP may take

8 the form of capital for investment, a transfer of assets, or other commitments or in-kind contributions. The public partner may also provide social responsibility, environmental awareness, local knowledge and an ability to mobilize local support. The private sector, on the other hand, is expected to make use of its expertise in commerce, management, operations, or innovation to run the business efficiently. The private enterprise may also contribute investment capital.

The paper also enumerated the reasons why gove rnments enter PPP to attract

private capital investment, to increase efficiency and use available resources more

effectively, and to reform sectors thrpugh a reallocation of roals, incentives and

accountability. The sectors covered by PPP were also mentioned in the paper.

While many claim that PPP is different from privatization and private sector

participation (PSP), this paper asserted that PPP at its core is still privatization. According to

Savas’ Privatization and public-private partnerships (1999) , PPP is a form of privatization

included in the ‘delegation’ strategy that requires “a continuing active role of the

government, which retains responsibility for the function while delegating the actual

production activity to the private sector”.

The paper also discussed the link between the capitalist crisis and privatization. It

stated that privatization is one of the neoliberal policies that have developed in the 1970s

when the capitalist system is, again, in crisis. The paper also explained how multilateral

institutions ‘advocate’ the implementation of PPP in the underdeveloped countries through

its multi-donor programs. In many Third World countries, PPP has been introduced through

conditionalities attached to loans from IMF, World Bank and the ADB.

The paper stated the fundamental conflict that exists under PPP arrangements. The goal of the public sector is to meet the needs of the population while the private sector’s goal is to maximize profit.

Most importantly, the paper discussed the major effects of PPP on infrastructure development namely, power debts and rate hikes, increase in rail transit fares, toll hikes and displacement.

The paper is influential for the researcher because it provides basic information and background on PPP in the Philippines. The information gathered from the paper will be used as basis for the evaluation of the PPP strategy of the government. The effects of PPP on infrastructure development discussed in the paper is parallel with the focus of the research.

Balangue, Glenis., PPP: Profits over Public Welfare. Ibon Facts and Figures Special

Release, 15 and 31 July 2011. 16 pages

This journal article focused on PPP as the main economic strategy of the Aquino

administration. In the Aquino government’s Philippine Development Plan (PDP) 2011-2016,

PPP is the centerpiece of Noynoy’s economic strategy. According to the PDP, inadequate

infrastructure is one of the major constraints in achieving inclusive growth. The paper also

mentioned the major infrastructure blocks identified by the PDP such as, inefficient transport

network (roads, ports, air and railroad) and unreliable power supply.

The journal article identified the priorities of the PDP, these are ammending the BOT

law, expanding to non-traditional sectors and realigning the bureaucracy. The proposed

ammendments on the BOT law are: one, to shorten the timeframe of the whole process of

applying, pre-qualifying, approving, bidding, awarding and implementation of PPP projects;

10 two, to expand the coverage of the BOT law; and last, a vital insertion of a provision that will allow implementation of quarantees against ‘regulatory risks’. Another priority if the PDP is the implementation of PPP in non-traditional sectors such as agro-industries, agriservices and fish trading centers and microinsurance. And the realigning of the bureaucracy. Executive

Order 8 was signed in September 2010 to create a PPP Center.

The paper also named the PPP priority projects of the Aquino adminstration. These are NAIA Expressway, Daang Hari SLEx Link Road Project, MRT/LRT Expansion

Program, NLEx-SLEx Connector, among others.

Furthermore, the paper discussed the detrimental effects of PPP on the ‘supposed’ public goods such as health, power, water supply and tollways and its socio-economic impacts like user fees and increased tariffs, displacement, increased government debt and loss of government’s capacity. The paper also discussed the link between infrastructure and development.

This journal article is relevant to the researcher because it discussed how the present administration intends to implement PPP and it complemented the first paper by naming additional impacts of PPP.

Ibon Foundation. PPP:More Public-Debt, Less Government Responsibility . Ibon Features.

November 2010. 16pages

According to this paper, PPP bloated public debt and facilitated corporate take-over of the government. During the first year of the Aquino administration, the government faced a 325 million peso budget deficit. Because of this, Aquino said, the country cannot afford to support its need for infrastructure. This is despite the fact that the country only spends 3% of

11 its GDP on infrastructure while our neighbor countires spend 5%. In his SONA, Pnoy claimed that through PPP “we will meet our needs without spending and we will also earn”.

But, no capitalist will invest on big projects in a country with a relatively small market like the Philippines. Thus, to attract investors, the government designed a new scheme that will protect the interest of the businesses. Aside from the guarantee of profits, the government is now also offering “pertinent incentives”. Regulatory risk management is one of these pertinent incentives. Under this, the government will protect investors from

“certain regulatory risk events such as court orders or decisions from regulatory bodies which prevent investors to adjust tariffs to contractually agreed levels”. This may lead to the undermining of the system of check and balance.

According to the paper, through PPP, many responsibilities of the government are now being transferred to private corporations. PPP reduces the role of the public sector in promoting growth and development and it undermines responsibility of the government to ensure economic opportunities for the weak and equitable distribution of wealth.

This paper is relevant to the researcher because it stated the social cost of public- private partnerships. This is parallel to the researcher’s focus of study.

E.S Savas. Privatization and public-private partnerships . Second Edition. CQ Press. New

York. November 1999. Retrieved from www.cesmadrid.es. 17pages

The book stated the theoretical background and the practical reality of privatization.

According to Savas, as an important feature of the new public management technique, government activities need to adopt market principles, and of its principal element is privatization. The book provided the researcher with a very comprehensive definition of

12 privatization. Savas enumerated the forms of privatization such as delegation, divestment and displacement. Delegation is the form of privatization in which the ‘government retains responsibility and oversight but uses the private sector for service delivery’. Under delegation are contract, public-private competition, franchise, grant, loan, favored tax and public-private partnership. Divestment, on the other hand, ‘means shedding an enterprise, function, or asset’. Divestment is just another term for “denetionalization” of state-owned enterprises. Its forms are sale, liquidation and free transfer. The last form of privatization is displacement. It is the ‘more passive or indirect process that leads to government being displaced gradually by the private sector’. It is also known as privatization by “attrition” or by “stealth”. One of its forms is deregulation.

This part of the book is relevant to the researcher. The other parts, however, are all attempts to justify the need for privatization.

Xie, Q., et al. Public-Private Partnership in Urban Economic Development and Prospects of their applications in China. School of Public Policy, George Mason University, USA. June

2002. Retrieved from http://unpan1.un.org/intradoc/groups/public/documents/aspa/unpan004644.pdf . 25pages

Public-private partnership, according to this paper, has diverse and vague definitions and to be able to conduct research on whether PPP is applicable to achieve urban economic development in China, it is important that one has a clear definition of PPP. The paper discussed the reasons for PPPs in urban economic development and for their expansion in the last two decades. A combination of neo-classical economic theory, the theory of state failure, the theories of public goods, market failure and merit goods provide theoretical

13 foundation for PPPs. According to neo-classical economic theory and theory of state failure, competitive markets are essential to efficient resource allocation and service production while public intervention leads to inefficiency of resource allocation and production. The theories of public good and market failure, on the other hand, argues that public intervention is inevitable beacause some urban services are non-excludable and because of the tendency to monopoly, the large initial investment, and huge uncertainty of return of goods and services and information asymmetry. While the theory of merit goods states that the government has to assure all the people access to basic goods and services such as health care and education regardless of their ability and willingness to pay for such services at market prices.

In US, the expansion of PPP in urban areas is because of two reasons: PPPs are established as pragmatic responses to the changing conditions in American urban regions; and PPPs are an institutional response to the increasing ‘complexity and fragmentation of community life’ for improvement of urban governance. In China, the increasing presence of private and other non-state actors provides a prerequisite of PPP.

For future researches on PPP, the paper suggested three things: examine the types of objectives for which PPPs have been developed to achieve in urban economic development ad the extent to which these objectives have been achieved; understand how PPPs operate to achieve different types of activities; more studies are needed to analyze how national and local conditions such as culture, history and political context affect the application of PPPs in urban economic development.

This is relevant because it provided the researcher with a background on the theories that served as the foundation of PPPs. It also explained how PPPs emerge and expand in urban communities in China and US. And most importantly, it suggested tips on how to do future researches on PPPs.

Akintoye, A.,et al. Public-Private Partnerships: Managing risks and opportunities . Blackwell

Publishing Company. UK. 2003. Retrieved from http://onlinelibrary.wiley.com/doi/10.1002/9780470690703.fmatter/pdf . 23pages

The book presented the overview of the involvement of the private sector in the delivery of public services throughout the world. It identified French-speaking Africa,

Eastern Europe, and South Asia as areas where PPP is fast growing. It also discussed the nature of risks involved with Private Finance Initiative (PFI) projects. The book also addressed the management of value of money in PFI projects. According to the book, the value for money gains are defined as ‘improvements in the combination of whole-life cost and quality that meet the users’ requirements’. It also detailed the stakeholder perspectives on PPP incuding the views of those involved in construction, legal services, finance, facilities management and local administration. PFI, according to the book, aims to transfer many risk from the public to the private sector. The risk allocation objective of the PFI projects can be attained through a combination of competitive procuremetn processes, contractual structures and contract terms. The book provided an assessment of PPP projects using tools such as risk allocation matrices, risk registers, risk calculation methodologies and management practice. It also provided an international perspective in risk management in the context of

PPPs in countries such as Singapore, Austria, Hong Kong, Thailand, USA, India, and South

Africa. In the last chapter of the book, it reviewed the gateway produced by the Office

Government Commerce (OGC) sa a prelude to the presentation of a new PFI risk assessment framework in the United Kingdom.

This book is relevant to the researcher because it states that PPP can bring about positive results. PPP can be perfected, at least, it is what the authors believe in. While it is not the case in the Philippines, it is still significant to know that in some countries like the

United Kingdom measures and strategies are implemented to manage the risks brought about by PPP projects.

Estache, A., et al. Where do we stand on Transport Infrastructure Deregulation and Public-

Private Partnership? World Bank Policy Research Working Paper Series. July 2004.

Retrieved fromhttp://elibrary.worldbank.org/docserver/download/3356.pdf?expires=1346334651&id= id&accname=guest&checksum=6AF74CFB8BAA34508568A86ED684ECB3 . 27pages

This research paper portrayed PPP in a different light. It raised three points. One, deregulation has different impacts in developed and developing countries: Project sizes are relatively larger in developed economies; the fiscal pay-offs are good in the short-run and unpredictable in the long-run; and as for the users, they have seen improvement in the quality of services and are often facing low prices.

Second, according to the paper, the possibility that the private sector will play a strong role in the transport infrastructure of all countries in the world is low. And the last point, the policy agenda linked with the follow-up to the strong commitment to deregulation and increased private sector participation is far from being small.

Though the researcher do not agree with the findings of the paper, it is still relevant to know how the World Bank wants PPP to be seen. PPP, in the paper, presents a win-win situation for both the public and the private sector.

Scope and Limitation

The study evaluated the public-private partnership strategy of the government in providing transportation infrastructure. Hence, it discussed the socio-economic impacts of public-private partnership in transportation infrastructure development. It focused on how the PPP-built expressways impact the welfare of the drivers of public utility vehicles and commuters. The researcher conducted a survey on drivers of public utility vehicles and commuters who regularly use the South Luzon Expressway, then compared the situation of the respondents before and after PPP or the toll hike. Thus, the said target sample must be regularly using SLEx for more than two years. The target sample was composed of employees, students and drivers who come from the south of Metro Manila but work/study in

Metro Manila. Due to time and financial constraints, the study did not include other expressways and mass rail transits. The study did not include those who own private vehicles and those who use SLEx to deliver goods. Furthermore, the study did not include other impacts of PPP on transportation infrastruture development such as displacement, land- use convertion, development aggression and increased government debt.

Significance of the Study

The purpose of this research is to assess the effectivity of public-private partnership

in transportation infrastructure development. It will also determine whether the drivers of

public utilty vehicles and commuters benefit from this strategy of the government. PPP has

17 provided us with better roads and improved transportation infrastructure, but all these come with a price. Since transportation infrastructure is part of the government’s ‘public-service’, it is important to know whether the PPP-built expressways really helped its supposed beneficiaries. Using the opinion of the people, this study will determine whether Filipinos are happy with the services the PPP-built expressways are offering and if they think that these services are worth what they are paying for. The study also aims to know whether people think that the toll fee they are paying is expensive, inexpensive or just right, and if they think that transportation services should cost this much. The study will compare the income of the drivers per day before and after the toll hike, the income of commuters minus transportation expenses before and after the toll hike and the allowance of students minus transportation expenses before and after the toll hike. Thus, this study will be relevant in assessing not only whether PPP is helpful or not, or whether PPP should be pursued or not but also, in determining whether the South Luzon Tollway Corporation and the Toll

Regulatory Board are imposing reasonable toll rates. The research can be a basis in determining the issues and concerns regarding PPP on transportation infrastructure development of the biggest stakeholder, the people. The research can provide facts that could be used by planners from the Department of Transportation and Communication and the Department of Public Works and Highways in their future infrastructure projects. Lastly, the research will evaluate the current PPP strategy of the government and thus, it may serve as a complementary or supplementary study to other future research.

CHAPTER II

BACKGROUND OF THE STUDY

Public-Private Partnership

HISTORY

Along with liberalization and deregulation, PPP and the other forms of privatization are one of the policies of globalization.

Privatization has been imposed by the first world countries since the 1970s to solve their crisis of overproduction and falling rates of profits caused by the decreasing demand of the working class for products. Meanwhile, the third world governments are experiencing debt crisis due to mounting debts from International Financial Institutions (IFIs) such as the

International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB).

Hence, as conditionalities attached to the loans, the IFIs implemented structural reforms known as the Structural Adjustment Programs (SAPs). Through SAPs, export-orientation was promoted, imports and foreign investment were liberalized, key economic sectors were deregulated, and state-owned enterprises were privatized. 1

Privatization in the Philippines first started during the term of President Corazon

Aquino. Presidential Proclamation 50 in 1986 gave way to the creation of the Committe on

Privatization to identify assets to be sold, and an agency, the Asset Privatization Trust (APT), to sell the assets. President Aquino also signed Executive Order No. 15 which resulted in 20 power generation projects by TNCs and local corporations. She also signed into law

Republic Act 6957 or the Built-Operate-transfer Law which allowed the private corporations to take over in implementing infrstructure projects. 2

1 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011 2 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011

To allow the full participation of private corporations, President Ramos amended the

BOT Law in 1993. Private corporations can now participate through, in additon to BOT, build-transfer (BT), build-lease-transfer (BLT), build-operate-own (BOO), build-transfer- operate (BTO), contract-add-and-operate (CAO), develop-operate-transfer (DOT), rehabilitate-operate-transfer (ROT), and the inclusion of unsolicited proposals. The Ramos administration undertook a massive privatization program including the sale of the Philippine

National Bank (PNB), Manila Hotel, Petron, Fort Bonifacio and MWSS. It also implemented subsequent SAPs through the 1991-1993 Economic Stabilization Program and the 1994-1997 IMF Exit-Program. 3

Under the Estrada administration, the country obtained a US$500 million loan package form the World Bank and the US$280 million standby facility from the IMF, through the 1998-2000 Standby Agreement from the IMF. The conditionalities included fiscal reforms, like imposition of new taxes, power-sector restructuring and financial sector reforms. 4

Former President Arroyo was the staunchest advocate of globalization. She completed the privatization of Napocor through the passage of EPIRA. 5

Privatization failed dramatically both in the third world and in the rich countries. By

the end of the 20th century, neo-liberal globalization and the policies it embodies have been

discredited. To recover from the bankruptcy of neo-liberal globalization, its proponents led

by the IFIs came up with ‘fresh’ policies to sanitize the image of imperialism. This ‘new’

policy was introduced as ‘public-private partnership’.

3 Ibid. 4 Ibid. 5 IBON Foundation. “PPP: Private Gains, Public Costs.” IBON Facts and Figures , September 2010

Despite the attempt to deodorize the term PPP, its real colors are hard to conceal.

IFIs are involved in providing project loans with conditionalities that create the policy environment taht shall facilitate PPP. The World Bank and the Asian Development Bank are the financiers of PPP either through bond releases, project guarantees and/or direct investment. 6

At present, the Aquino administration, is making PPP its centerpiece program.

AQUINO BRAND OF PPP

The PPP of the Aquino administration is a mere continuation of the projects of the

Arroyo administration. His vision, much like that of the former president, is to create a massive transportation network that would link export processing zones, international ports, agribusiness zones, and even sprouting information-communication technology (ICT) hubs in some urban centers in the country. But there are two ways by which the Aquino brand of

PPP is different from that of Arroyo. 7

First is granting regulatory risk guarantees. Regulatory risk guarantees, as stated in

the PPP brochure of the government, ensure that the private partner recovers the amount

stipulated under the contract or the corresponding formulae by which tolls, fees, rentals and

other charges are computed in the event that a statutory regulator intervenes and affects

price- or tariff- setting. This may take the form of make-up payments from the government

to the private partner and adjustments to contract terms will be offered in the negotiations for

solicited projects. The amount will be determined by the government. Meaning, regulatory

6 Magtuliz, Prinz. “Funding, guarantees eyed by multilaterals for PPP projects.” Business World . 19 November 2010, 7 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011

22 risk guarantess make sure that the government would pay the private sector the total cost in case external problems arise and even if the project turns out to be not beneficial to the

Filipino people. 8

The second is the systematic inclusion of social services in PPP projects. The current

PPPs in health includes the construction of new or rehabilitation of existing hospital facilities, vaccine production, and research. Private sector in research and development in health will erode government capacity to develop new knowledge for the good of the society.

The modernization of government-owned hospitals, on the other hand, is meant to attract medical tourists who are expected to take advantage of the relatively lower cost of health services in the country. In education, classroom construction is in the mode of PPP. 9

Also, an infrastructure fund called the Philippine Infrastructure Developmnet Fund

(PIDF) is being drawn up by the Aquino administration to ensure that PPP projects will get

paid. The Php200 billion PIDF will be issued as bonds. It is patterned after India’s

Infrastructure Development Finance Co. Ltd. (IDFC) and Indonesia’s PT Indonesia

Infrastructure Finance (IIF). The Aquino administration also changed the BOT center to a

PPP center on September 2010 through Executive Order No. 8 and transferred it from the

Department of Trade and Industry (DTI) to the National Economic Development Authoriry

(NEDA). 10

PPP was also reflected in the budget allocation of the present administration. Php15

billion was alloted to PPP support funds of three departments: the Department of

8 Government of the Republic of the Philippines. “Public-Private Partnership Projects (PPP Brochure)”. November 2010. 9 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011 10 Ibid.

Transportation and Communication (Php2.5 billion), Department of Agriculture (Php5 billion) and the Department of Public Works and Highways (Php5 billion). 11 The

government also allots money to the government counterpart funds or the Strategic Support

Fund (SSF) and the Project Development Monitoring Facility (PDMF). 12 The bulk of SSF is

alloted to DPWH and DOTC for expropriation proceedings while PDMF is a revolving pool

of funds from the Philippine government and the government of Australia under a Capacity

Building Technical Assistance project from the Asian Development Bank (ADB) and the

Canadian government to enhance the investment environment for PPP and to develop a

robust pipeline of viable and well-prepared PPP infrastructure projects. 13

The PDMF, which will be made available to government implementing agencies will

fund pre-investment activities, including preparation of project pre-feasibilty studies,

feasibility studies and financial models, development of PPP options, project structuring,

providing transaction advisory services during the bidding process and preparation of

contract documents. It will also help to develop and strengthen the capacity of International

agencies to identify, formulate and implement bankable PPP projects. 14

IMPACTS OF PPP

Experiences with PPP projects throughout the world have shown that the risks and

damages borne by the public greatly outweigh whatever benefits the partnership bring.

PPP leads to the institutionalization of user fees and increased tariffs even for the

most basic of services. The issuance of these user-fees and tariffs divides the country into

11 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011 12 Personal Interview with Dr. Gilbert Llanto, Senior Research Fellow and BOT expert at PIDS, 30 January 2013 13 Public-Private Partnership Center. 14 Ibid

24 those who have the means to pay for the privatized services and those who do not. It also further marginalize the poor majority from the social infrastructure. An example of this is the 2011 300-percent increase in toll in the South Luzon Expressway. 15

Another inevitable consequence of PPP, according to IBON Foundation, is economic

and physical displacement. Displacement does not only happen in urban areas where the

urdan poor are subject to demolitions in cases of road widening and rehabilitation projects,

expressway and rail transit systems, but also in rural areas and farming communities to pave

the way for projects. This is made worse by the absence of a comprehensive and sustainable

mass housing program, including acceptable and economically viable relocation sites to offer

to the victims of forcible evictions. Such is the case of the demolition of the urban poor

communities in Sitio San Roque in North Triangle, Quezon City. The demolition is to start

the 29.1-hectare property in North Triangle into the so-called Quezon City Central Business

District (CBD). This is a Php22-billion PPP project in the form of a joint venture between

the National Housing Authority (NHA) and the Ayala Land Inc. 16

PPP also causes increased debt. According to IBON Foundation, the financing

scheme of PPP project entails the “raising of funds to finance a single indivisible large scale

capital investment whose cash flows are the sole source to meet financial obligations and

provide returns to investors”. This requires a strict borrowing program wherein the lenders

are involved heavily in the project or the payment of debt is ensured through clear policy

15 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011 16 IBON Foundation. “PPP: Private Gains, Public Costs.” IBON Facts and Figures , September 2010

25 formations. It is still the government that guarantees the debts incurred by PPP deals since

PPP projects are still public in character. 17

And last but not least, PPP also erodes the government’s capacity to provide public utilities and social sevices. The skill to provide these services is being compromised as building and operating infrastructure is turned over to the private corporations. This is a serious threat to the country’s welfare since it will lead to dependence on the private sector to manage, operate and maintain services and facilities that are necessary for the country’s development. 18

Schemes for Private Sector Participation in Infrastructure Development

Various schemes for private sector participation in infrastructure development are provided in the BOT Law. First is the Build and Transfer (BT). It is a contractual arrangement whereby the project proponent undertakes the financing and construction of a given infrastructure development facility and after its completion turns it over to the government agency of the local government unit (LGU) concerned which shall pay the proponent on an agreed schedule its total investment expended on the project plus a reasonable rate of return thereon. 19

Second is the Build-Lease-and-Transfer (BLT). It is where the private partner is authorized to finance and construct an infrastructure or development facility and upon its completion turns it over to the government agency concerned on a lease arrangemnet for a

17 IBON Foundation. “PPP: Profits over Public Welfare.” IBON Facts and Figures , July 2011 18 Ibid. 19 RA 7718 and its Implementing Rules and Regulations as cited in Privatization: Corporate Takeover of Government, IBON BOOKS , 2003

26 fixed period after which ownership of the facility is automatically transferred to the government agency or LGU concerned. 20

Third is the Build-Operate-and-Transfer. Under this arrangement, the private partner undertakes the construction, including financing of a given infrastructure facility and the operation and maintenance thereof. The project proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in the project. The project proponent transfers the facility to the government agency at the end of the fixed term not exceeding 50 years. This shall include a supply and operate situation which is a contractual arrangement whereby the supplier of equipment or machinery for a given facility operates the facility providing in the process technology transfer and training of Filipino nationals. 21

Under Build-Operate-and-Own (BOO), on the other hand is an arrangement where

the private proponent is authorized to finance, construct, own, and operate and maintain an

infrastruture or development facility, in which the proponent is allowed to recover its total

investment, operating, and maintenance costs plus a reasonable rate of return by collecting

tolls, fees, rentals, or other charges from facility users. Under this project, the proponent

which owns the assets of the facility may assign ita operation and maintenance to a facility

operator. 22

20 RA 7718 and its Implementing Rules and Regulations as cited in Privatization: Corporate Takeover of Government, IBON BOOKS , 2003 21 Ibid. 22 Ibid.

Build-Transfer-and-Operate (BTO) is where an agency/LGU contracts out the building of an infrastructure facility to a private entity such that the contractor builds the facility on a turn-key basis, assuming cost overruns, delays, and specified performance risk.

Once the facility is commisioned satisfactorily, title is transferred to the implementing agency under an agreement. 23

Contract-Add-and-Operate (CAO) arrangement adds to an existing infrastructure

facility which is renting from government and operates the expanded project over an agreed

franchise period. There may be or may be not a transfer arrangement as regards the added

facility provided by the project proponent. 24

Develop-Operate-and-Transfer (DOT) is where favorable conditions external to new infrastructure project to be built by the project proponent are integrated to the arrangement by giving the same the right to develop adjoining property, and thus, enjoy some of the benefits the investment creates such as property or rent values. 25

Rehabilitate-Operate-and-Transfer (ROT) is where an existing facility is turned over

to the private sector to refurbish, operate and maintain for a franchise period, at the expiry of

which the facility is turned over to the government. The term is also used to describe the

purchase of an existing facility from abroad, importing, refurbishing, erecting, and

consuming it within the host country. 26

23 RA 7718 and its Implementing Rules and Regulations as cited in Privatization: Corporate Takeover of Government, IBON BOOKS , 2003 24 Ibid. 25 Ibid. 26 Ibid.

Under Rehabilitate-Own-Operate (ROO), the private sector is allowed to refurbish and operate with no time limitation imposed on ownership. As long as the operator is not in violation of its franchise, it can continue to operate the facility in perpetuity. 27

Among all these, the BOT remains to be the most commonly used scheme.

The South Luzon Expressway (SLEx)

The South Luzon Expressway (SLEx) is a 60-kilometer highway (including its extensions) that connects Manila to the provinces of Cavite, Laguna, Batangas and Quezon.

It was known as South Superhighway (SSH) and Manila South Expressway (MSEx) form

1969 to 1976. Officially known as Radial Road 3 or R-3, it was only named South Luzon

Expressway from 1976. 28

Originally, it was operated by the Construction Development Corporation of the

Philippines (CDCP), then in 1977 the management was transferred to the Philippine National

Construction Corporation (PNCC). SLEx is divided into to concessions. The first

expressway is the Metro Manila Skyway System, it is from Buendia to Alabang. It is jointly

operated by the Skyway Operation and Management Corporation (SomCo) and Citra Metro

Manila Tollways Corporation (CMMTC). The second expressway is the South Luzon

Tollway or the Alabang-Calamba-Sto.Tomas Expressway (ACTEX). It a operated jointly by

the South Luzon Tollways Corporation, a joint-venture of PNCC and SMC-backed Citra

group of Indonesia, and the Manila Toll Expressway Systems, Inc. (MATES). The San

27 RA 7718 and its Implementing Rules and Regulations as cited in Privatization: Corporate Takeover of Government, IBON BOOKS , 2003 28 Personal Interview with Mr. Julius G. Corpuz, Spokesperson, Toll Regulatory Board, 28 January 2013

Miguel Corporation(SMC)-backed Citra group of Indonesia is where the MTD Capital

Berhad, the original partner, sold their shares. 29

The expressway starts in Manila’s Paco District at President Elpidio Quirino Avenue

and passes through Manila, Makati, Pasay, Parañaque, Taguig and Muntilupa in Metro

Manila, San Pedro, Biñan, Carmona in Cavite, then to Biñan City, Sta. Rosa, Cabuyao, and

Calamba in Laguna and ends in Sto.Tomas, Batangas. 30

In 2006, the South Luzon Tollway segment underwent rehabilitation through the

SLEx Upgrading and Rehabilitation Project, which rehabilitates and expands the Alabang

Viaduct as well as the road from Alabang to Calamba, and eventually connect the expressway to the Southern Tagalog Arterial Road (Star Tollway) to Sto. Tomas, Batangas. 31

The South Luzon Expressway Project is a public-private partnership in the form of build, rehabilitate, operate and transfer. The participating companies at the time of the project are the MTD Capital Bhd group (Malaysia), Hopewell Holdings (Hongkong, China) and the Northeast Development and Acquisitions Corporation (Philippines). This deal with the South Luzon Tollway Corporation was worth US$ 214.6 million. The World Bank is also directly involved in this project, through its investment arm, the International Finance

Corporation, through a US$ 50 million loan. 32

Toll rates in SLEx gradually increases over time. The latest increase happened in

2011. This 300-percent increase was to recoup the Php 11.8 billion that SLTC reportedly

29 P ersonal Interview with Mr. Julius G. Corpuz, Spokesperson, Toll Regulatory Board, 28 January 2013 30 South Luzon Expressway 31 Ibid. 32 World Banks’s Online Private Participation in Infrastructure Database as cited in IBON Foundation. “PPP: Private Gains, Public Costs.” IBON Facts and Figures , September 2010

30 spent to rehabilitate SLEx. This rate hike was further aggravated by the government when it insisted that toll roads are covered by the 12-percent value-added tax. 33

One of the PPP priority projects of the Aquino administration is the NLEx-SLEx connector. It involves a construction of a 13.4 kilometer 4-lane elevated expressway over the

Philippine National Railway (PNR), the right of way of which starts at Caloocan City and ends in Makati City. The projected cost of this project is Php 21 billion. 34

Other proposals to further rehabilitate/develop SLEx are under serious consideration

by the government.

South Luzon Expressway (Alabang to Calamba, 28.61 kms.) Historical Unit Toll Rates (Peso/Km.) Under PNCC VEHICLE 1977 1980 1983 10/01/96 CLASS 100% increase 30% increase No increase 69% increase Questioned Segment* Controlled Segment* Class 1 0.0700 0.1400 0.1800 0.1800 0.3000 Class 2 0.1400 0.2800 0.3600 0.3600 0.6000 Class 3 0.1800 0.3600 0.4700 0.4700 0.7900 Class 4 0.1250 0.2500 0.3200 0.3200 0.5400 Class 5 0.2250 0.4500 0.5800 0.5800 0.9800

Note : * Questioned Segment - Balintawak to Tabang, NLT and Magallanes to Alabang, SLT Controlled Segment - Burol to Sta. Ines, NLT and Alabang to Calamba, SLT ** Vehicle Reclassification from 5 classes to 3 classes Date of Implementation - Feb. 14, 1999

Source: Toll Regulatory Board

33 IBON Foundation. “PPP: Private Gains, Public Costs.” IBON Facts and Figures , September 2010 34 Government of the Republic of the Philippines. “Public-Private Partnership Projects (PPP Brochure)”. November 2010.

South Luzon Expressway (Alabang to Calamba, 28.61 kms.) Historical Unit Toll Rates (Peso/Km.)

Under PNCC 03/09/08 VEHICLE 12/01/2003 07/15/04 01/01/05 08/01/06 5/12/07 CLASS 02/14/1999 12/31/10 Veh.Reclassification 29% increase Class 1 0.257936 0.332737 0.517935 0.724347 0.933610 0.840249 0.756224 Class 2 0.515873 0.665476 1.035870 1.448694 1.867220 1.680498 1.512448 Class 3 0.773809 0.998214 1.553805 2.173041 2.800830 2.520747 2.268672 Class 4 Class 5

Source: Toll Regulatory Board

South Luzon Expressway Project (Alabang to Sto. Tomas, 36 Kms.) Historical Unit Toll Rates (Peso/Km.) APPROVED TOLL RATE IMPLEMENTED TOLL RATE VEHICLE Effective January 1, 2011 DATE OF EFFECTIVITY CLASS 1-Jan-11 1-Jan-11 1-Feb-11 1-Mar-11 1-Apr-11 1-Oct-11 Class 1 3.029754 2.684495 2.800000 2.900000 3.029754 3.393324 Class 2 6.059507 5.368990 5.600000 5.800000 6.059507 6.786649 Class 3 9.089261 8.053485 8.400000 8.700000 9.089261 10.179973

Note : *** VAT Inclusive Source: Toll Regulatory Board

TRB-Approved Tollway Rates with 12% E-VAT, effective 12:01 am, 01 October 2011

CLASS 1 (Sedans, SUVs, AUVs, PUJs, Pick-ups and Vans)

SKYWAY TOLLBOOTHS SLEX TOLLBOOTHS ENTRY/EXIT SKYWAY NIC C5 BIC SUC ALA FIL SHS SNP SWD CAR MAM STR ABI CAB SIL CAL POINTS ELEVATED Bicutan 72 49 49

Sucat 118 84 84 34

Alabang 164 118 118 69 34

Filinvest 168 122 122 73 38 4

Susana Heights 179 133 133 84 49 15 12

San Pedro 185 139 139 90 55 21 16 5

Southwoods 198 152 152 103 68 34 30 19 13

Carmona 204 158 158 109 74 40 35 23 19 5

Mamplasan/GRU 213 167 167 118 83 49 44 32 28 14 8

Sta. Rosa 221 175 175 126 91 57 52 40 35 22 16 7 ABI 232 186 186 137 102 68 63 52 47 33 28 19 11 Greenfields/ETON Cabuyao 239 193 193 144 109 75 70 59 53 40 35 26 19 6

Silangan 244 198 198 149 114 80 76 63 59 45 40 31 23 12 4

Calamba 260 214 214 165 130 96 91 80 75 61 56 47 39 28 21 15

Sto. Tomas 25

Source: South Luzon Tollway Corporation (slex.diverseinnovatin.com)

CLASS 2 Light Trucks, Tourist/School & Public Utility Buses and Class 1 vehicles with a height of 7 feet & above SKYWAY TOLLBOOTHS SLEX TOLLBOOTHS SKYWAY ENTRY/EXIT NI BI SU AL SH SN SW CA MA ST AB CA SI CA ELEVATE C5 FIL C C C A S P D R M R I B L L POINTS D Bicutan 145 98 98 16 Sucat 237 168 69 8 23 13 Alabang 329 237 69 7 8 24 14 Filinvest 337 245 77 8 5 6 26 17 Susana Heights 361 269 101 32 23 9 0 27 18 San Pedro 371 279 111 42 34 11 9 0 30 20 Southwoods 398 306 138 69 60 36 26 6 7 31 21 Carmona 408 316 148 79 71 48 36 10 6 7 33 23 Mamplasan/GRU 426 334 166 97 89 66 54 28 17 4 5 35 25 10 Sta. Rosa 442 350 182 113 81 70 43 33 15 0 1 5 ABI 37 27 12 Greenfields/ETO 465 373 205 136 104 92 67 56 38 22 3 4 7 N 38 28 14 Cabuyao 479 387 219 150 118 107 81 70 52 36 14 7 8 2 39 29 15 Silangan 489 397 229 160 128 117 90 80 62 47 24 10 7 8 2 42 33 18 Calamba 521 429 261 192 160 150 123 112 95 78 56 41 31 9 0 3 Sto. Tomas 51

Source: South Luzon Tollway Corporation (slex.diverseinnovatin.com)

CLASS 3 (Heavy and Multi Axled Trucks, Trailers) SKYWAY TOLLBOOTHS SLEX TOLLBOOTHS SKYWAY ENTRY/EXIT NI BI SU AL SH SN SW CA MA ST AB CA SI CA ELEVATE C5 FIL C C C A S P D R M R I B L L POINTS D 14 Bicutan 218 147 7 25 10 Sucat 356 252 2 4 35 20 Alabang 493 356 104 6 8 36 22 Filinvest 505 368 116 12 8 0 40 25 Susana Heights 541 404 152 48 35 4 6 41 27 San Pedro 556 419 167 63 51 15 9 1 46 31 Southwoods 597 460 208 104 91 56 40 0 2 47 32 10 Carmona 612 475 223 119 71 56 15 5 7 7 50 35 13 Mamplasan/GRU 639 502 250 146 98 82 42 26 2 4 3 52 37 15 Sta. Rosa 663 526 274 170 122 106 66 50 23 6 8 7 ABI 55 41 19 Greenfields/ETO 695 559 307 203 156 140 99 84 58 33 9 1 1 N 58 43 21 Cabuyao 719 582 330 226 178 151 122 106 79 56 21 2 4 2 59 44 22 Silangan 733 596 344 240 192 176 136 120 94 70 36 14 6 8 8 66 49 27 Calamba 781 664 392 288 240 224 184 169 142 118 84 62 48 4 6 5 Sto. Tomas 48

Source: South Luzon Tollway Corporation (slex.diverseinnovatin.com)

THE SOUTH LUZON TOLLWAY CORPORATION

The South Luzon Tollway Corporation was established on September, 2002. It is a joint venture project of the MTD Manila Expressways, Inc. (MTDMEI) and the Philippine

National Construction Corporation. 35

As stated in the Supplemental Toll Operation Agreement (STOA), SLTC, the investor, committed to undertake all works required for the SLEx project, including its total financing, without sovereign guarantees, and, with the recovery of investment being in the

35 South Luzon Tollway Corporation

35 form of the collection by the Manila Toll Expressway Systems, Inc. (MATES), an operation and maintenance company. 36

SLTC was granted a 30-year contract that would last until 2036, upon signing the

STOA on February 3, 2006. 37

On the other hand, MATES was mandated to take over the maintenance and operation

of SLEx upon the expiration of the PNCC’s franchise. PNCC’s franchise was supposed to

end on March 2007, but MATES deferred its mandate upon PNCC’s request for the Toll

Regulatory Board (TRB) to allow MATES to operate while applying for franchise renewal.

This was granted by the TRB through a Toll Operation Certificate (TOC) for an interim

period. MATES’s deferment was lifted on January 2009, but the PNCC continued to operate

the SLEx until May 2, 2010. 38

SLTC’s mission is to ensure that the SLEx remains the Philippine’s safest expressway and at the same time, improve the lives of the people living in communities straddling the superhighway. 39

THE CONCESSION

Involved in the concession of the SLEx Project under the Supplementary Toll

Agreement (STOA) are: the Toll Regulatory Board as the grantor; the South Luzon Tollway

Corporation(SLTC) as concessionairre; Philippine National Construction Corporation

36 Ibid. 37 Ibid. 38 Ibid. 39 South Luzon Tollway Corporation

(PNCC) as franchisee; and the Manila Expressway Systems, Inc. as the O&M (operate- maintain) company. 40

The joint venture agreement for the SLEx was undertaken on August 22, 2000

between MTD Manila Expressways (MTDME) and the Philippine National Construction

Corporation (PNCC). On October 21, 2005, then President Gloria Arroyo approved the

usufruct rights over the PNCC’s franchise. The assignment of usufruct to operate and

maintain SLEx was signed on January 25, 2006. And, as already cited, the concession was

created on February 3, 2006 under the STOA. 41

The terms of the concession include the following: SLTC invests money or borrows

from banks without government guarantee; SLTC constructs and builds the expressway and

relives the government of all construction risks; SLTC operates and maintains the

expressway and its facilities in compliance with government standards; and to recover its

investment, SLTC, thru its assigned Operate and Maintain company, MATES, collects toll

upon issuance of the Toll Operation Permit. 42

The partner agencies are: MTDCPI, the turnkey contractor of SLTC; BCEOM,

French Eng. Consultant, the independent consultant of SLTC; Renardet SA, supervision

engineer of MTDCPI; Toll Regulatory Board (TRB), as the regulatory agency; Department

of Public Works and Highways (DPWH), as the implementing agency; and Philippine

Management Staff and Luzon Urban Beltway as the project monitoring bodies. 43

40 Ibid. 41 Ibid. 42 South Luzon Tollway Corporation 43 Ibid.

The Toll Regulatory Board

The Toll Regulatory Board (TRB) was created by virtue of Presidential Decree No.

1112 entitled, ‘Authorizing the establishment of toll facilities on public improvements, creating a board for the regulation thereof and for other purposes’ or the Toll Operation

Decree. It is an attached agency of the Department of Transportation and Communication assigned to regulate and supervise the construction of all toll roads in the Philippines.

Established in 1977, the Toll Regulatory Board is the government office tasked to facilitate public-private partnership in the transportation infrastructure sector. 44

According to Presidential Decree No. 1112, the huge financial requirements of the government’s development programs have made it necessary to seek out alternative sources of financing to ensure the prosecution of certain desirable infrastructure projects that complement the over-all national effort. Further, the potential resources of the private sector could be tapped to the maximun benefit by the government dispensing to a great extent the availment of additional domestic and foreign borrowings as well as utilization of government guarantee or security. And, in order to attract private sector investment in the government’s infrastructure projects, the collection of toll fees for the use of certain public improvements, that would allow a reasonable rate of return on investments, should be authorized; Provided that, the collection of toll fees and the operation of toll facilities by the private sector should be loosely supervised and regulated in the public interest. Hence, the need to create the Toll

Regulatory Board. 45

44 Presidential Decree No. 1112 retrieved from Arellano Law Foundation, Philippine Laws and Jurisprudence Databank 45 Presidential Decree No. 1112 retrieved from Arellano Law Foundation, Philippine Laws and Jurisprudence Databank

Headed by its Executive Director Edmundo Reyes Jr., the TRB has five core functions as stated in PD 1112: (1) subject to the approval of the President of the Philippines, to enter into contracts in behalf of the Republic of the Philippines with persons, natural or juridical, for the construction, operation and maintenance of toll facilities such as but not limited to national highways, roads, bridges, and public thoroughfares. Said contract shall be open to citizens of the Philippines and/or to corporations or associations qualified inder the

Constitution and authorized by law to engage in toll operations; (2) determine and decide the kind, type and nature or public improvement that will be constructed and/or operated as toll facilities; (3) condemn private property for public use subject to the provisions of the existing law; (4) issue, modify and promulgate from time to time the rates of toll that will be charged the direct users of toll facilities and upon notice and hearing, to approve or disapprove petitions for the increase thereof. Decisons of the Board on petitions for the increase of toll rate shall be appealable to the Office of the President within ten days from the promulgation thereof. Such appeal shall not suspend the imposition of the new rates, provided however, that pending the resolution of the appeal, the petitioner for increased rates in such case shall deposit in a trust fund such amounts as may be necessary to reimburse toll payers affected in case a reversal of the decision; and (5) to grant authority to operate a toll facility and to issue therefore the necessary “Toll Operation Certificate” subject to conditions imposed by the

Board. 46

TRB exercises its jurisdiction over all the toll way facilities in the country. This includes the South Luzon Expressway (SLEx), North Luzon Expressway (NLEx), Subic-

Clark-Tarlac Expressway (SCTEx), Manila-Cavite Expressway (Coastal Road), South Metro

46 Presidential Decree No. 1112 retrieved from Arellano Law Foundation, Philippine Laws and Jurisprudence Databank

Manila Skyway (Skyway), and the Southern Tagalog Arterial Way (Star Tollway). These toll facilities are managed by the private partners of the government, like the South Luzon

Tollways Corporation (SLTC) for SLEx and the Manila North Tollways Corporation

(MNTC) for NLEx. The role of the government, through TRB, is to regulate and supervise the construction and rehabilitation of roads and the increases in toll. When asked as to how they determine the toll, the TRB spokesperson said that the increase in toll, as well as when the private partner can demand an increase in toll, is predetermined in the contracts between the private corporation and the government. The rate of increase is determined using a formula also stipulated in the contracts. All of the toll collected goes to the private corporations, but in some cases, a small portion goes to the government partner/concessionaire. 47

TRB allots contracts through bidding and sometimes through negotiations. These contracts vary from one transaction to another but the common factor among all of them is the presence of the sovereign guarantee on the rate of the return on investment. As to the amount of the contracts, the TRB said that it is hard to determine this now since the amount has already accumulated, the original contract only involves construction. Succeeding contracts are made for maintenance of facilities. 48

Aside from determining the toll, one of the more controversial roles of the TRB is to

condemn private property. Because of the expropriation law or the right of way acquisition

act, the TRB is authorized by law to expropriate property. When constructing roads,

47 Personal Interview with Atty. Edmundo O. Reyes, Jr., Executive Director, Toll Regulatory Board, 28 January 2013 48 Personal Interview with Atty. Edmundo O. Reyes, Jr., Executive Director, Toll Regulatory Board, 28 January 2013

40 sometimes it traverses into private lands. The owner of the land will not automatically donate or sell it. Thus, through the expropriation law, the TRB is allowed to buy and give the owner just compensation. Private corporations do not have this ability, hence the need for the government to intervene. 49

The TRB has been entering into contracts with the private sector since its date of

establishment. All of their projects are under PPP arrangements and they believe that PPP is

an effective way to provide transporation infrastructure to the people. 50

49 Personal Interview with Mr. Julius G. Corpuz, Spokesperson, Toll Regulatory Board, 28 January 2013 50 Personal Interview with Atty. Edmundo O. Reyes, Jr., Executive Director, Toll Regulatory Board, 28 January 2013

CHAPTER III

PRESENTATION AND ANALYSIS OF DATA

The sample is composed of ninety (90) people who pass through the South Luzon

Expressway on a regular basis. Sixty (60) respondents are commuters, from which thirty

(30) are commuters who take the bus and another thirty (30) are commuters who take the jeepney. The remaining thirty (30) are jeepney drivers. The commuters who take the bus are surveyed in a terminal in Cubao, they are usually Laguna bound, specifically Calamba and

Los Baños. The commuters who take the jeep and the jeepney drivers are both surveyed in a terminal in Alabang, they are bound to B iñan, GMA and Carmona. The data gathered are analyzed as one data since the study is not a comparative study, rather a descriptive study which seeks to assess the socio -economic impact of public-private partnership on infrastrucutre development, specifical ly in the case of South Luzon Expressway.

PROFILE OF RESPONDENTS

Figure 1. Gender of Respondents

30 30 25

20 Commuters (Bus) 20 15 Commuters (Jeep) 16 14 Jeepney Drivers 10 10 5 0 0 Male Female

The graph shows that among the ninety (90) respondents, sixty -six (66) are male and twenty-four (24) are female. Upon further breakdown, among the commuters who take the bus, twenty (20) are male and ten (10) are female; while among the commuters who take the jeep, sixteen (16) are male and fourteen (14) are female; and when it comes to jeepney drivers, all are male. Males still dominate the transportation sector in the country. Though women are now more empowered and are now also working to provide a li ving for their family, many are still kept at home to do household chores and are seldom found outside the premise s of home. Also, using this data, one can infer that driving is still generally a task for males. Though it is widely accepted now that wome n can drive, there is still a stigma upon women public-utility vehicle drivers.

Figure 2. Age of Respondents

16 14 15 14 12 12 11 10 10 Commuters (Bus) 8 9 Commuters (Jeep) 6 6 6 Jeepney Drivers 4 4 4 2 3 2 2 0 1 1 0 0 0 15 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65 and above

The graph shows that majority of the respondents are of 25 to 34 years of age.

Twenty-five (25) are 15 to 24 years old, twenty -two (22) are 35 to 44 years old, fifteen (15)

44 are 45 to 55 years old, nine (9) are 55 to 64 years old and only one (1) belong to the 65 and above age bracket. Almost half of the respondents with ages between 15 and 24 are students and are therefore not yet working. 87% of all the respondents falls w ithin the working age.

Most of the commuters are young and are at the peak of their productivity. Among the drivers, the age bracket is 25 to 64, with its pinnacle at 45 to 54.

Figure 3. Educational Attainment of Respondents

18 18 16 17 14 12 14 12 Commuters (Bus) 10 11 8 9 Commuters (Jeep) 6 7 Jeepney Drivers 4 2 1 1 0 Elementary High School College

The graph shows that 10% of the respondents reached elementary level only; almost half reached high school; and 41% had the chance to go to college. The educational levels of the respondents are slightly above average with many finishing high school and some reaching college. Due to poverty, people usually stop schooling after high school and then try to find work which do not require a college degree. While some who were able to reach college, took up vocational or two -year courses or was not able to finish college.

Unfortunately, nine respondents reached elementary level on even graduate.

Figure 4. Civil Status of Respondents

30 25 20 15 17 10 13 5 0 0

The graph shows that 60% of the respondents are married or are living with their partner; 33% are single; and 7% are either a widow/widower or are separated. This is expected since more than 70% of the respon

54 respondents are breadwinners while 36 are not. Among these 36 a re students who regularly pass through SLEx upon going to and from school and housewives who do household errands and other personal matters. Because most of the respondents are breadwinners, an increase in toll fee or fare will be affecting their net income s and thus their families . Among the 54 respondents, 30 are jeepney drivers. All of the jeepney drivers surveyed are sole income-earner s in their families. Hence, an increase in toll will greatly burden the entire family.

Figure 6. Number of Relatives Residing With the Respondent

16 14 15

12 13 10 11 11 11 Series 1 8 8 Series 2 6 6 Series 3 4 5 5 2 3 3 0 0 0 to 1 2 to 3 4 to 5 above 5

The graph shows that 11 respondents live with 0 to 1 relative; 33 live with 2 to 3 relatives; 33 live with 4 to 5 relatives; and 14 live with above 5 relatives. Most of the respondents have 4 to 5 relatives residing with him/her. Most of the time this consists of a partner and 3 to 4 kids. Since 25 respondents are between ages 15 to 24 and 30 respondents are single, it is understandable that 44 respondents live with 0 to 3 relatives o nly. For

47 jeepney drivers, since they are all married, 50% are living with 4 to 5 relatives and 16% are living with m ore than 5. All of them depend on the incomes of the jeepney drivers who happen to be the breadwinner.

SOCIO-ECONOMIC INDICATORS

Figure 7. Income of Respondents after the Toll Hike

25 25 20

15 Commuters (Bus) Commuters (Jeep) 10 11 11 Jeepney Drivers

5 6 2 2 0 0 3 0 Increased Decreased Remained the same

11% of the respondents said that their income increased after the imposition of higher toll fee in SLEx, 28% said that their income remained the same; another 28% said that their income decreased; and the remaining 33% do not have jobs. 8 out of the 10 who said that their income increased are commuters who coincidentally got promoted or got a raise in their respective jobs; and the two jeepney drivers who experienced an increase in income said that they are now working longer hours. Among those who said that th eir income remained the same, 22 are commuters and three are jeepney drivers. According to the jeepney drivers, before the toll hike it was the price of diesel that was very high. And then, when the price of

48 diesel went down, the toll increased, thus the ir income remained the same. For the commuters who said their income remained the same, the implication is that their net income after the increase in fare decreased. Of the 28% who said that their income decreased, all are jeepney drivers. For most jee pney drivers, an increase in toll means a decrease in their income. Because according to them, fares do not increase when the toll increased, thus there are no other possible source of toll fee besides their suppossed income.

Figure 8. Income of Jeepney Drivers Before and After the Toll Hike

3000

2500

2000

1500 Before After 1000

500 Daily IncomeDaily of Jeepney Drivers 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

The graph shows the change in income among the 30 jeepney drivers surveyed. As already mentioned, two jeepney drivers said that their income increased, three said that their income remained the same and 25 said that their income decreased. The rate of ch ange is astonishing. The highest rate in which income decreased is by 66% while the lowest is 25%.

Life for jeepney drivers has always been tough and the increase in toll due to the privatization of roads only aggravated their condition. Most of the dri vers are under the boundary system. This means that they do not own the jeepney that they are driving and they

49 have to pay a fixed amount to the jeepney owner everyday regardless of whether they still have income left for their family or not. This bounda ry usually amounts to Php700. The toll is paid by the driver and not the owner. Three drivers who earn Php3000, Php2500 and

Php2000 everyday before the toll hike now earn P1000 each. These drivers have their own jeepneys. The situation is even worse fo r those who do not have their own jeepney. Before the toll hike the highest income among non -owners of jeepney is Php1000, now it is Php500.

But this is still high relative to the income of most of the drivers which is Php700 to Php800 before the toll hi ke and Php300 to Php400 after.

Figure 9. Toll Fee per Day Before and After the Hike

350

300

250

200 Before 150 After 100

50 Daily ExpensesDaily on Toll perDriver 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

The graph shows the change in the total amount of toll paid by jeepney drivers everyday. The toll depends on the route that the jeepneys take. The increase in toll, according to the drivers is 300% to 500%. Four driver s said that the new toll rate increased their toll expenses by almost 9 times.

Figure 10. Fare after Toll Hike

25 27

15 Commuters (Bus) 15 Commuters (Jeep) 10 12

5 3 0 0 3 0 0 Increased Decreased Remained the Uncertain same

The graph shows that 25% of the commuters, both who take bus and jeepney, said that they experienced a fare increase; no one said their fare decreased; 50% said that their fa re remained the same; and another 25% said that they cannot recall whether their fare increased or not. Of the 30 who said that their fare remained the same, 27 are commuters who take the jeepney. This coincides with the sentiment of jeepney drivers that fares do not increase even if the toll increased. Hence, in terms of fares, the commuters are not much affected by the increase in toll.

Figure 11. How long have you been regularly passing through SLEx? (for Commuters) How long have you been working as a PUJ driver? (for Drivers)

30 25 27 20 Commuters (Bus) 15 10 14 Commuters (Jeep) 9 10 9 5 7 Jeepney Drivers 5 2 0 2 4 1 0 Less than a 1-3 years 3-5 years more than 5 year years

Seven of the respondents have been regularly passing through SLEx for less than a year, 21 have been regularly passing through SLEx for 1 to 3 years, 12 for three to five years and 50 have been regularly passing through SLEx for more than five years. Most of the resp ondents have been regularly passing through SLEx even before the 300% increase in toll in 2011. Most of them have seen SLEx before and after the rehabilitation. Thus, most of them has the credibility to judge whether SLEx has improved or not.

Figure 12. How often are you passing through SLEx?

30 30 25

20 18 Commuters (Bus) 15 16 Commuters (Jeep) 10 Jeepney Drivers 5 7 7 7 1 04 00 0 0 Everyday Once a week Twice or more Twice a month per week or less

The gra ph shows that 38 of the respondents travels through SLEx everyday; 23 once a week; 11 twice or more per week; and 18 twice a month or less. This only strengthened the credibility of the respondents to determine whether the services offered by SLEx have improved or not. Since most of them pass through SLEx everyday, any change, may it be positive or negative, will be observed by the respondents.

RESPONDENTS’ INSIGHT ON THE TOLL HIKE AND SLEX

Figure 13. Are you affected by the Toll Hike?

25 29 24 20 Commuters (Bus) 15 Commuters (Jeep) 20 Jeepney Drivers 10 10 5 6 1 0 Yes No

55 of the respondents said that they are affected by the toll hike while 35 said that they are not. Among those who said that they are not affected, 34 are commuters, this is because according to them, the fare did not increase after the toll hike. The l one driver who said that he is not affected said that his income before and after the toll hike is both very low hence the toll hike did not really change anything. Of the 55 who said that they are affected by the toll hike, 26 are commuters. According to them, the increase in toll led to the increase in fare and the increase in fare decreased their net income and affected the frequency in which they go home. Some started to rent an apartment since according to them, given the high fare, it is more prac tical to rent an apartment than to travel everyday. As for the 29 drivers who said that they are affected by the toll hike, the raise in toll, as shown in Figure 9, is almost unbearable. This is also reflected in Figure 8 where the striking change in the income of drivers is shown. For most jeepney drivers, they now face break -even at best, deficits at worst. When asked, they expressed their sentiments through jokes. One said,

“Dati namba babae pa, ‘nung tumaas na ‘yung toll, namamakla na.”, to this, ano ther remarked, “ ‘Di ba pare dati 4 asawa mo? Ngayon isa na lang, sinoli na ‘yung 3 kasi di na kayang buhayin.’

Figure 14. Did the services offered by SLEx improved when the toll increased?

22 20 21

15 18 Commuters (Bus) Commuters (Jeep) 10 10 Jeepney Drivers 9 8 5 2 0 0 0 Yes No Uncertain

The graph shows that 54% of the respondents said that the quality of services offered by SLEx improved when the toll increased, 43% said that SLEx did not improve and 2% of the respondents have no comment. Among those who said yes are 40 commuters and 9 drivers while those who said no are composed of 18 commuters and 21 drivers. Hence, it can be inferred that for the commuters, SLEx improved while for the drivers, it did not.

Figure 15. Are you satisfied about the quality of services offered by SLEx?

25 26 24 23 20 Commuters (Bus) 15 Commuters (Jeep)

10 Jeepney Drivers

5 7 6 4 0 Yes No

The graph shows that 39 of the respondents are happy about the quality of services offered by SLEx while 51 are not. This means that although 49 respondents said that SLEx improved, not all of them are pleased with these ‘improvements’.

Figure 16. Is the quality of services offered by SLEx worth the toll that it charges?

25 26 24 20 Commuters (Bus) 15 17 Commuters (Jeep) 13 10 Jeepney Drivers

5 6 4 0 Yes No

The graph shows that for 23 respondents the services offered by SLEx is worth the toll that it charges while for 67 respondents it is not. From the 49 who said that SLEx has improved, only 39 are satisfied about the said improvem ent and from them, only 23 said that the improvement is worth the increase in toll. These three questions are asked to fully assess the satisfaction rating of the respondents regarding the services offered by SLEx. From this, one can deduce that although there are improvements in SLEx, these improvements are not satisfactory and ultimately, not worth the toll that the people are paying.

RESPONDENTS’ INSIGHT ON PPP AND GOVERNMENT RESPONSIBILITY

Figure 17. Are you aware that SLEx is built under PPP arrangements?

20 20 18 19 16 14 16 12 14 Commuters (Bus) 10 11 Commuters (Jeep) 8 10 Jeepney Drivers 6 4 2 0 Yes No

The graph shows that 50% of the respondents are aware that SLEx is built under PPP arrangements while the other 50% are not. This reflects that while PPP is widely broadcast as the prime policy of the Aquino administration when it comes to providing transportation infrastruc ture, a good number of people are still relatively unaware. This unwareness may be attributed to the fact that engaging in public -private partnerships is the decision of the government and the people are not consulted whether they want it or not.

Figure 18. Are you in favor of PPP?

25 27

20 Commuters (Bus) 15 16 Commuters (Jeep) 15 Jeepney Drivers 10 10 8 5 6 5 3 0 0 Yes No No comment

The g raph shows that 14 respondents are in favor of PPP, 58 are not and 18 have no comment. There are mainly three reasons why 14 people favored PPP: one, they think that the government has no capability to build roads; two, they believe that there is rampant corruption in the government and building infrastructure projects like expressways will only create opportunities for corruption; and three, they perceive private corporations to be more capable and more efficient. 18 respondents do not have any comment b ecause they do not feel empowered enough to have a say in the subject at hand. According to them, what they think does not matter because they are not the ones who make the decisions.

Figure 19. Building Transportation Infrastructure is Whose Responsibility?

30 30 25 29 28

20 Commuters (Bus) 15 Commuters (Jeep) 10 Jeepney Drivers

5 1 0 1 0 0 1 0 Government Private Corporation No comment

97% of the respondents said that it is the government’s responsibility to provide transportation infrastructure to its people. Only two said that it should be the private corporation who should build transportation infrastructure and one has no comment. This means that though there are those who favor PPP and do not trust the government’s capacity to handle infrastructure projects, they still believe that it is still the state’s responsibility to create transportation infrastructure for the people.

CHAPTER IV

CONCLUSION AND RECOMMENDATIONS

It is the right of every person to have access to premium yet affordable transportation infrastructure and it is the responsibility of the government to provide this to its people. The government has the budget to build roads but it chooses to tap the resources of the private sector because according to them, they have other priorities. Due to the tight fiscal situation the government is in, they say it is more practical to channel its funds to other social services like education and health. This may be a palpable argument if the government is not yet starting to privatize schools and hospitals.

The majority of public-private partnership projects in the Philippines is in transportation infrastructure. In fact, according to TRB Executive Director Edmundo Reyes,

Jr., all of their projects are, in one way or another, forms of PPP. 51 How did the privatization

of roads affect the people? PPP on roads leads to drastic increase in toll. Toll hikes are too

much of a burden for ordinary Filipinos and the minimum-wage earners. But according to

PPP advocates, you cannot put the blame on PPP. For them, if the people want better roads,

they should pay for it. As for those who cannot afford to pay the toll, they have the option to

take alternative routes -- those that do not traverse the toll ways. Of course, the trip is longer,

but it is free. 52 This way of reasoning is odd, since transportation is a public good and it

really is supposed to be free. According to the government, there is another option for the

people and that is to pay their taxes. We will not be needing the ‘help’ of the private sector if

the government is able to increase its tax revenue. Ironically, the government reduced the

corporate tax from 35% to 30% and increased the value-added tax from 10% to 12%. 53

Clearly, their idea of increasing the tax revenue is to tax the poor rather than the rich.

51 Personal Interview with Atty. Edmundo O. Reyes, Jr., Executive Director, Toll Regulatory Board, 28 January 2013 52 Personal Interview with Dr. Gilbert Llanto, Senior Research Fellow and BOT expert, PIDS, 30 January 2013 53 Personal Interview with Mr. Jose Enrique Africa, Executive Director, IBON Foundation, Inc., 19 January 2013

Another option for the government to have funds for transportation infrastructure development is by borrowing from International Financial Institutions. Compared to that, they say PPP is better.

For a country to achieve economic growth, an effective transportation system is neccessary. Thus, according to the proponents of PPP, not only that we cannot blame the private sector for their interference, we should also thank them for investing in our country’s infrastructure projects despite the business climate that we have. Protest actions against toll hike and road privatization by militant organizations, policy inconsistency and regulatory uncertainty do not look appealing for business. Thus, they say, we should be thankful that there still are multi-national corporations and transnational corporations willing to invest.

If you were a businessman and you invested in a project, it is only natural that you expect a return of investment. So, to encourage the investors, the government has to guarantee that the private corporations will profit. In the case of SLEx, the guaranteed return of investment (ROI) is contained in the Toll Operation Agreement (TOA) between the South

Luzon Toll Way Corporation (SLTC) and the Toll Regulatory Board (TRB). Under their contract, SLTC is allowed to seek a rate increase every two years. As previously mentioned, the 2011 300-percent toll hike in SLEx, according to SLTC was due to the rehabilitations made in SLEx. SLTC factored in the doubling of the number of lanes, the installation of TV

Cameras, and electronic collection system, among other physical improvements. All these reportedly cost Php. 11.8 billion, which SLTC will recoup through a guaranteed 17-percent

ROI stipulated in the 30-year Supplemental Toll Operation Agreement (STOA). According to the calculations made by IBON, at a traffic volume of 300 000 vehicles a day, SLTC earns an annual gross revenue of Php 11.79 billion, inclusive of tax. This means that it can easily

62 recover the Php11.8 billion investment and then profit from its monopoly of SLEx until

2036. Even if the Php 11.79 billion annual gross revenue depreciate over time, it is still more than compensated by the annual increase in vehicular traffic which is more than 10% per year. 54

But the government thinks that this encouragement is not yet enough, hence to further entice them to invest in our country, the government incurred debt to allot a budget to create a Public-Private Partnership Center and for project-related cost or the government counterpart funds, in the form of Project Development Monitoring Facility (PDMF) and Strategic

Support Fund (SSF). This is how the government is subsidizing the private corporations to invest in the country. Really, should we thank the private corporations for taking advantage?

Public-private partnership is not different from privatization. PPP is just a term engineered by the proponents of privatization when privatization lost its charm. The term changed but the essence and the intentions are the same. They say that PPP does not necessarily mean an outright sell-off of the government asset to the private sector. In PPP, the assets are still government-owned and only the management will be controlled by the private corporation. But as Mr. Jose Enrique Africa, Executive Director of IBON

Foundation, Inc., put it, if the private sector thinks that this partnerships are fair and sincere, then would they be willing to let the government manage private assets? There is nothing fair in PPP. In PPP, it is private gains over public welfare. Private investors participate in infrastructure development with a clear goal of making and maximizing profits. With the advent of PPP, the job of the government has been reduced from ensuring that the

54 IBON Foundation. “PPP: Private Gains, Public Costs.” IBON Facts and Figures , September 2010

63 infrastructure needs of the people are met to ensuring the most favorable investment climate for the private sector.

Amidst all these, the most vulnerable are the masses. They say that it is for the people that roads are built. But what good would a very expensive road do? The main objective of the study is to assess the socio-economic impacts of PPP on transportation infrastructure development using the case of commuters and PUJ drivers in SLEx. The data gathered by the researcher proves that PPP failed to give solutions to the problems of the transportation sector. It also did nothing to improve the socio-economic status of the people, especially the jeepney drivers. The toll hike only worsen their condition. Income of jeepney drivers decreased by 25% to 66%. Because of the toll hike, drivers earn as low as Php300 a day. For a sole breadwinner in a family of 5 or more, Php300 a day would not suffice.

Php300 may be able to cover food expenses, but what about health and education? It would be possible to send their children to school up to high school, but college education would be unlikely. The child will most probably take a vocational course or find a job that does not require a college degree. The chance to get out of the poverty trap would be minimal.

As for the commuters, they are not directly affected, because an increase in toll does not necessarily translate to an increase in fare. Fares are determined by the Land

Transportation and Regulatory Board (LTFRB) and are uniform throughout the country.

Accordingly, the fare will not automatically increase upon the increase in toll. In fact, half of the respondents said that their fare remained the same. Thus, the burden of the toll really falls on the jeepney drivers. But, though not directly and the link is not explicit, an increase in transportation cost will eventually be passed to the consumers. An increase in

64 transportation cost will lead to higher prices of goods and services. In the end, everyone will be affected.

All these in exchange for better roads -- the commuters and jeepney drivers beg to differ. While majority of the respondents think that SLEx physically improved, they are still not satisfied by these ‘improvements’ and much more, they do not think that these

‘improvements’ are worth the increase in toll.

PPP does not promote the interests of the public. It assures neither fiscal gains nor economic benefits. It is the private corporations participating in PPP that will benefit from guaranteed profits. Improved infrastructure will also reduce the cost of business. Clearly, it is the MNCs and TNCs that will benefit from PPP. Aside from them, big local corporations will also gain from infrastructure development. The underprivileged sector will not benefit since PPP-built infrastructure projects do not provide long-term employment, lower prices and ensure domestic support and protection. 55 So why is the government focusing on making

PPP the main strategy to deliver infrastructure projects?

Evidently, the state has fallen prey to the neo-liberal globalization scheme of the first

world governments, TNCs and multi-lateral institutions and organizations like, the

International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB)

and the World Trade Organization (WTO). To cope with the persistent crisis of over-

production, they devise these neoliberal policies that include liberalization, deregulation and

privatization. Of course, PPP is a form of privatization that helps the first world to maintain

55 IBON Foundation. “PPP: Private Gains, Public Costs.” IBON Facts and Figures , September 2010

65 its dominance by retaining its control over international markets that serve as its dump site for surplus products and capital.

What is genuine development? Is it characterized by having visually appealing buildings and roads? Genuine development is far beyond having these photogenic infrastructures, it is making these infrastructures accessible and affordable for the people.

Clearly, PPP failed to do this. The common denominator among PPP projects is that they are geographically concentrated in NCR and other urban centers. Aside from this, access to this infrastructure services are also expensive. Thus, only those who have the money can access this supposed public services. They say that it is better than having no infrastructure at all, but the point is, if it was the government who built this, then it should have been provided at lower rates. 56

PPP in the Philippines, like in many countries, failed miserably to deliver its promises of improved services, increased efficiency and lower costs. Instead, it has resulted in more bankruptcy and indebtedness of most governments, has significantly hinder the people’s access to social services and has intensified the problems confronting the people, especially the poor. Whatever benefit the country gained from PPP, if there is any, is greatly outweighed by the long-term damages that it causes.

The researcher believes that the vicous cycle of corporate takeover of the government, debt and onerous user fees must be stopped from further oppressing the people.

56 Personal Interview with Mr. Jose Enrique Africa, Executive Director, IBON Foundation, Inc., 19 January 2013

Recommendations

Public-private partnership operates under two core justifications: one, the government does not have funds to provide services to the people, and two, the government does not have the ability to create infrastructure and deliver public goods and services. To these, IBON

Foundation says, to increase the government’s tax revenue, it can increase the the income tax of the 10 richest families or increase the corporate income tax. But the government did not do this because, according to them, tax limits the creativity of the private sector. So, they decreased the corporate tax and chose to tax the poor instead by increasing the value-added tax and implementing the sin tax law. By doing this, the government loses Php20 to Php25 billion a year. As for the second justification, the strategy of PPP is to erode the capacity of the government to engage in infrastructure building. If the government does not have the capacity to build roads now, it is because two decades ago, as a policy choice, the government turned over the chance to build roads and toll ways to private corporations. Why is it that private corporations have the capacity to build transportation infrastructure?

Because, as already mentioned, they are not taxed by the government. 57 This is a never-

ending cycle. If this continues, the government will soon be heavily dependent on the private

sector to manage, operate and maintain services and infrastructure necessary for the

country’s development. Whatever the reasons for the need to engage in PPP are, all these are

just justifications for letting the private sector provide goods and services for profit, for their

own interest.

PPP is a manifestation of the state abandoning its responsibilities. Politically, the

government will do anything it can to maintain the program because there are private

57 Personal Interview with Mr. Jose Enrique Africa, Executive Director, IBON Foundation, Inc., 19 January 2013

67 interests involved. But PPP is not and will never be economically sustainable in a third world country like the Philippines, because the people do not have the money to pay for the services. Hence, the government will soon need to address the people’s need when it comes to infrastructure development. As to when will PPP cease to exist, it depends on the political climate in the country. If the people will unite againsts privatization and other neoliberal policies, the government will be forced to listen and even the private business sector will be scared to interfere. 58

Privatization can be defeated. To raise much-needed revenues, people’s organization

have long been campaigning for the reversal of economic liberalization, repeal of automatic

debt servicing, cancellation of odious debt, nationalization of key economic sectors, and

curbing corruption in the government and tax evasion by corporations. 59 People’s struggle

must emphasize the issue of state and social responsibility. The government should be

reminded, through collective action, that public utilities, such as water, power and

transportaion infrastructure, education and health among others play a major role in

achieving national development, and in protecting the welfare of the people, particularly the

poor and the marginalized. These are public goods and services, hence, these should never

be used for profit-maximization and should never be privatized, in the name of neoliberal

global restructuring that merely provides more opportunities for the global elite to maintain

hegemony and exploit the world’s resources. These neoliberal policies should not be allowed

to further burden the people and fetter development. The people and not the corporations

should take over the government to protect the national patrimony and lead the country to

genuine economic development.

58 Personal Interview with Mr. Jose Enrique Africa, Executive Director, IBON Foundation, Inc., 19 January 2013 59 Privatization: Corporate Takeover of Government, IBON BOOKS , 2003

BIBLIOGRAPHY

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www.wikipedia.org

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slex.diverseinnovatin.com

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ppi.worldbank.org

APPENDICES